Published December 7, 2010
Big-ticket property deals prop up market
Investment sales already thrice as high as last year as major players ooze confidence
By KALPANA RASHIWALA
(SINGAPORE) In a reflection of which way the big boys have been betting, investment sales in the property market - which involve deals of at least $5 million each - have risen sharply this year to touch a total of $32.5 billion. This is three times the $10.6 billion for the whole of last year, according to figures from CB Richard Ellis.
The year-to-date 2010 number is bettered only by the record $54.4 billion lapped up in 2007. CBRE predicts this year will close at about $33-35 billion.
The second half of the year has been particularly impressive. So far this quarter, about $9.9 billion worth of deals have been sealed, surpassing the Q3 figure of $9.5 billion. For next year, CBRE predicts that investment sales should be able to cross the $20 billion level.
'In all, 2010 has been a good year for real estate investments as broad-based recovery in Singapore's economy and its subsequent strengthening led to an overall increase in real estate investment opportunities,' says CBRE's executive director (investment properties) Jeremy Lake.
The public sector, principally the Government Land Sales (GLS) Programme, contributed about $9.1 billion, or 28 per cent, of overall investment sales year to date (YTD).
The residential sector has been this year's star performer, accounting for $15.96 billion. This was more than double the $7.3 billion in 2009 and nearly half of the YTD 2010 total investment sales. Of the residential investment sales so far this year, 35 per cent or $5.6 billion was contributed by GLS sites, followed by about $1.6 billion from private development sites.
CBRE defines investment sales as transactions of at least $5 million, including homes and sales of land and buildings, both strata and en bloc. It also includes change of ownership of real estate via share sales such as floats by Reits. Investment sales often reflect the confidence of major players in the sector's mid- to long-term prospects.
Mr Lake observed a strong appetite for residential land this year across the board - whether the players were local or foreign, niche, mid-sized or large.
Some $1.5 billion worth of collective sales have been sealed this year (including those involving commercial developments), a big jump from $101 million last year but a sliver of the $11.9 billion seen in the peak year of 2007.
Most of the collective sale sites sold this year were in Upper Serangoon (District 19), East Coast (District 15) and Balestier (District 12). The bulk of the sites changed hands at $20-50 million apiece, CBRE said.
Credo Real Estate managing director Karamjit Singh forecasts about $4-6 billion of collective sales may be transacted next year as 'we'll see residential developers diverting funds from suburban development sites to invest more in mid-prime and prime residential sites as that's the segment of the market with more price upside'. There are also a lot of collective sale sites, including major ones, being worked on this year, that will be ready for launch only next year.
'The majority of deals next year are likely to be in the $100-300 million range but there will also be a few mega ones above $500 million in Districts 9, 10, 11 and 15,' he added.
CBBE said that more than $5 billion of office buildings have changed hands since the start of the year. Mr Lake recalled that last year, the only buyers in the office market were high networth private groups, at a time when financing for office investments was less forthcoming and the outlook for the market was weaker.
In contrast, a return of liquidity and financing this year has led to a re-emergence of institutional buyers like Reits/property funds and listed companies on the office investment scene. The office market fundamentals have also improved, he added.
'Helped by a recovery in Grade A office rents, best-in-class Grade A office buildings are being benchmarked currently at about $2,400-$2,500 psf, whereas a year ago, arguably it was below $2,000 psf,' Mr Lake said. Investors are today looking at yields of about 3.5 per cent in anticipation of further rental growth in the next 12-24 months.
While some investors like funds have pursued offices this year to generate income as the leasing market improves further, others have picked up older office blocks to redevelop as apartments, CBRE observed.
Overall, the top investment sales deal so far this year has been the state's $1.7 billion sale of a white site next to Tanjong Pagar MRT Station to GuocoLand, followed by separate sales of one-third stakes in Marina Bay Financial Centre's Phase 1 to K-Reit Asia and Suntec Reit at about $1.4 billion and $1.5 billion respectively.
CBRE figures show $3.6 billion of industrial property deals this year. DTZ senior director (investment advisory) Shaun Poh said that major industrial and logistics Reit listings this year helped to contribute to this figure. 'Next year, further divestments by JTC Corp and acquisitions by other potential Reit IPO candidates as well as existing Reits/funds should continue to support industrial property investment sales. However the total value of deals may ease,' he added.
Source: www.businesstimes.com.sg
